Are climate skills a must for finance? Plus: Big Tech could be treated like banks, fast fashion is big money, and more

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Are climate skills becoming a must-have for investment professionals?

The CFA Institute announced Monday that it would start offering a new certification for climate skills, signaling the importance of this know-how for today’s finance pros.

LinkedIn found in its Global Green Skills Report this year that only one in 15 finance professionals say they are proficient in “green skills” — a mismatch for investors wanting to integrate sustainability into their strategies.

So far, more than 20,000 investment professionals have previously received a separate ESG certification from the CFA Institute. But as global climate change continues and more investors turn to sustainable investing, the organization sought to design a more in-depth course solely focused on climate skills. Those capabilities could include analyzing financial projections or adjusting a portfolio so it’s aligned with a net-zero pathway, for example.

Investment pros are preparing for new climate and carbon disclosures from the SEC and want to incorporate the rules into their analyses, says Richard Fernand, head of certificate management at the CFA Institute.

He notes that the association is not trying to evangelize or make people change their behaviors. Rather, he says, it’s about enabling investment analysts and portfolio managers “to better integrate climate risks into their analysis.”

Indeed, demand for this skill set comes at a time of backlash for ESG efforts.

In a September survey from The Conference Board of 100 major U.S.-based companies, almost half said they have experienced ESG backlash. Financial services companies were shown to have been hit the hardest.

A separate report from Cerulli Associates found that most asset managers remain committed to ESG despite political pressures. None said they would stop incorporating ESG considerations into investment decisions altogether, but about 30% indicated they plan to be more cautious in their messaging about ESG-related activities.

“Anti-ESG bills are often based on the assumption that asset managers are sacrificing investment returns to address non-financial considerations,” Cerulli director Michele Giuditta says, noting that 73% of asset managers are having related discussions with clients and 57% are drafting communications to “address the misconceptions of ESG.”

Meanwhile, lawyers are seeing an influx of lenders wanting to protect themselves against greenwashing risks. Bloomberg reported this week that some attorneys are being called upon to add declassification clauses on sustainability-linked loans. The largely unregulated SLL market has grown to $1.5 trillion, but attorneys say they can’t ignore the risks of mislabeling this type of product and are stripping the sustainability element from loans.

Elizabeth Levy, head of ESG and portfolio manager at Trillium Asset Management, says the CFA Institute’s moves are a step in the right direction toward creating a standard practice related to climate skills. Such capabilities are “increasingly important for investment professionals,” she says, “as the realities of physical climate-change effects are making themselves felt globally.”

It remains important to be able to analyze the effects that climate change can have on a company or asset’s future — and therefore valuation — she notes, “regardless of the political environment.”

“The increasing demands of investors and regulators globally means American investors who aren’t climate competent will have an increasingly hard time competing globally,” Levy says.

Laura di Bonaventura, principal at MUUS Climate Partners, an early-stage climate tech investor, adds that “every investment professional should be knowledgeable about climate change” to some degree. “It is arguably the single largest global threat,” she says.

“Specialized climate tech investors are attracting capital even in today’s tough fundraising environment,” she notes. “At the same time, investors across asset classes — from muni bonds underwriting energy-intensive hospitals, to REITs with at-risk physical assets, to public companies facing consumer demand for greater sustainability — could benefit from greater climate expertise.”

Google and Apple could be regulated like traditional banks — if the CFPB has its way. The consumer financial regulator wants to start regulating digital wallets and payment apps, as it outlined Tuesday in a new proposed rule.

“Big Tech companies and popular apps now control more and more of the consumer payments system,” CFPB director Rohit Chopra wrote on LinkedIn.

The proposed rule aims to oversee 17 tech companies that handle over 5 million transactions annually, which is 88% of the market, according to the regulator. Transaction volume across all service providers was estimated to be roughly $893 billion, and the CFPB expects it could reach almost $1.6 trillion by 2027.

The CFPB’s proposal comes five months after the agency issued a national consumer advisory warning the public that money stored on popular payment apps like PayPal, Venmo or CashApp are not always insured and could disappear in the event of a failure.

The proposed rule is subject to public comments through January. If the CFPB’s proposal moves forward, it says its “supervisory oversight would significantly expand its visibility into the operations of the market’s largest operators.”

Chopra argues that “many payment platforms embed their technology in mobile devices that gives them the power to surveil and censor.” The CFPB’s moves, he says, are aimed at ensuring “they are following the law when it comes to privacy, fraud and more.”

Gene Grant, CEO of Houston-based fintech company LevelField Financial, worries about the unintended consequences of the proposed rule. “The seeming intent is to remove regulatory arbitrage and to ensure a level playing field for all market participants,” he wrote on LinkedIn. “It will be interesting to see the consequences to consumers.”

Joseph Rodriguez, a VP and executive risk officer at Capital One, said the “long and short is that the CFPB is coming for fintech.”

“While that sounds ominous, it actually doesn’t have to be a bad thing,” Rodriguez wrote on LinkedIn. “Those that have the desire to do the right thing, and the talent to execute against that strategy, will have a massive competitive advantage. But now’s the time to make sure you feel good about both aspects of that equation.”

Fast-fashion giant Shein wants to go public and is targeting a pricey $90 billion valuation for the U.S. initial public offering of its low-cost merch, Bloomberg reports, citing unnamed sources. The Singapore-based company was valued at $66 billion just six months ago, but the price tag is cheaper than its $100 billion valuation in April 2022. The company anticipates net income of $2.5 billion this year. Shein acquired British online brand Missguided last month and reportedly wants to snag Topshop as well. Shein faces hurdles with going public as the company continues to fight allegations of forced labor. The timing of the IPO is unknown.

5.4%

The IRS announced new tax brackets Thursday, in its annual effort to avoid “bracket creep” — when people get pushed into higher brackets due to cost-of-living adjustments. The U.S. agency moved tax brackets up by 5.4% — a formula that largely relies on the consumer price index. Last year, the tax brackets were adjusted upward by 7.1% to account for the highest rate of inflation in 30 years.

Let’s travel back 120 years, shall we? The St. Luke Penny Savings Bank opened in November 1903, in Richmond, Va. The bank was run by banking pioneer Maggie Walker, the first Black woman to charter a bank. On its opening day, the bank received more than $8,000 in deposits — ranging from 31 cents to about $100.

The CFA Institute has introduced a Climate Risk, Valuation and Investing certification.

The five courses — each of which involves a test — cover climate science, risks and regulations; transition finance; climate’s effect on the valuation of listed equity and debt; its effect on valuing alternative assets; and the role of climate risk in portfolio management.

Do you believe all investment professionals need ‘green skills’? Why or why not?

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